Wednesday, October 14, 2015

"At Least Walmart’s Credit is Stable" (WMT)

From Barron's Income Investing:

Wal-Mart Stores (WMT) issued a profit warning on Wednesday morning and said sales may not grow at all for its current fiscal year. Its stock is down 8% at $61.50 in mid-day trading (See, Ben Levisohn’s post, “Why Wal-Mart is Getting Hammered…and What It Means” for more details).

Nonetheless, Moody’s Investors Service is maintaining its current Aa2 — high grade — investment rating and stable outlook.

Analyst Charlie O’Shea focuses mostly on Wal-Mart’s $20 billion share buyback plans, also announced Wednesday, in his comments. Moody’s has been critical of companies that fund large buybacks with debt. But O’Shea says Wal-Mart’s buyback levels are reasonable relative to its debt levels — and it doesn’t need to issue more . He writes Wednesday:

We view Walmart’s announcement today that it is increasing its share repurchase authorization to $20 billion, which is roughly $11 billion in ‘new’ availability, to be executed over the next two years or so, as within our band of tolerance for the ratings, especially as no new debt is necessary to execute the plan....MORE